2015 (10) TMI 1452 - AT - Income Tax

Eligible for exemption under section 10(23C)(iiiad) - CIT(A) allowed the claim - Held that - Commissioner of Income-tax (Appeals) has considered the issue and the submissions made by the authorised representative and rightly observed that the Assessing Officer himself held that the donations received by the society are for the corpus fund for the construction of building of the society. Donations for the corpus fund are exempt under section 11 of the Act. In the present case though the society was registered under section 12A of the Act exemption under section 11 was not claimed in the return of income and as such it cannot be entertained. We find that the corpus donations received by the assessee-society are separated the annual receipts of the educational institution are only 69, 24, 857. Keeping in view of the order of the Income-tax Appellate Tribunal in the case of Jat Education Society v. Deputy CIT 2011 (3) TMI 569 - ITAT DELHI exemption under section 10(23C)(iiiad) can be denied if the aggregate annual receipts of each educational institution is more than 1 crore. We are of the view that since the annual receipts of the educational institution of the assessee- society are below 1 crore exemption under section 10(23C)(iiiad) of the Act the surplus is allowable and accordingly the learned Commissioner of Income-tax (Appeals) has rightly deleted the addition in dispute. - Decided in favour of assessee.

Summary

Issues:
- Exemption claim under section 10(23C)(iiiad) of the Income-tax Act, 1961.
- Whether surplus income is eligible for exemption when total receipts exceed Rs. 1 crore.
- Treatment of donations towards corpus fund in calculating annual receipts for exemption eligibility.

Analysis:
1. Exemption Claim under Section 10(23C)(iiiad):
The case involved an appeal by the Revenue against the order of the Commissioner of Income-tax (Appeals) regarding the deletion of an addition made by the Assessing Officer amounting to Rs. 20,98,900. The assessee-society, running an educational institution, claimed exemption of its surplus income under section 10(23C)(iiiad) of the Act. The Revenue contended that the total receipts exceeded Rs. 1 crore, making the assessee ineligible for the exemption. The Commissioner of Income-tax (Appeals) deleted the addition, stating that the donations towards corpus fund should not be added to the receipts, as they were for the construction of the society's building. The Tribunal upheld the deletion, emphasizing that the donations for the corpus fund were exempt under section 11, and since the annual receipts of the educational institution were below Rs. 1 crore, the exemption under section 10(23C)(iiiad) was allowable.

2. Surplus Income Eligibility for Exemption:
The Assessing Officer had initially held that the surplus income of Rs. 20,98,900 was taxable as the receipts of the society exceeded Rs. 1 crore. However, the Commissioner of Income-tax (Appeals) and the Tribunal both analyzed the nature of the donations towards the corpus fund and the distinction between the society's receipts and those of the educational institution. They concluded that since the annual receipts of the educational institution were below Rs. 1 crore, the exemption under section 10(23C)(iiiad) was applicable, and the surplus income was not taxable.

3. Treatment of Donations towards Corpus Fund:
The crucial aspect of the case revolved around the treatment of donations received towards the corpus fund of the society. The Tribunal referred to previous decisions and held that donations specifically meant for the corpus fund, as in this case for constructing the society's building, should not be considered as part of the society's receipts for exemption eligibility purposes. By segregating the corpus donations and focusing on the educational institution's receipts, the Tribunal affirmed the Commissioner's decision to allow the exemption claimed under section 10(23C)(iiiad).

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the Commissioner of Income-tax (Appeals)'s decision to delete the addition of the surplus income in dispute. The judgment clarified the treatment of donations towards the corpus fund and reiterated the criteria for determining eligibility for exemption under section 10(23C)(iiiad) based on the annual receipts of the educational institution.